IRA to accelerate renewables but financial challenges still acute: Bank of America, Ørsted Americas

IRA to accelerate renewables but financial challenges still acute: Bank of America, Ørsted Americas | Utility Dive

Dive Brief:

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In spite of growing demand for renewable energy, many of the projects financed by Bank of America have struggled to reach the finish line in the wake of supply chain disruptions, interconnection delays and price volatility, Karen Fang, managing director, global head of sustainable finance for Bank of America, said during a Monday morning session at the BNEF Summit in New York.
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Kelly Cummins, deputy director of the Office of Clean Energy Demonstrations at the U.S. Department of Energy, agreed with other experts who said financial viability is now a bigger challenge for emerging energy technologies than technical viability.
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The Inflation Reduction Act could spur more than $3 trillion in investment and add some 100 GW of renewable energy to the grid, Chelsea Jean-Michel, an offshore wind analyst with BloombergNEF, said.

Dive Insight:

If global energy markets were a baseball game, the IRA would move the U.S. from first base to third base, Jean-Michel said. But the renewable energy industry still faces numerous challenges, panelists said.

Some of those challenges could be addressed in the near-term. Fang estimated that some 30% to 40% of renewable energy projects could benefit from IRA provisions that make tax credits more transferable, opening new avenues for financing. But she said Bank of America is seeing more projects from tax-exempt entities that the IRA made eligible for direct pay tax benefits, while taxable entities wait for further clarification on the transferability provisions from the IRS.

Even for emerging technologies such as green hydrogen and advanced nuclear reactors, financial viability — rather than the viability of the technology itself — is the biggest barrier to deployment, said Kelly Cummins, deputy director of the Office of Clean Energy Demonstrations at the U.S. Department of Energy.

While Cummins said she didn’t have a “favorite child,” she said she believed green hydrogen would have an edge over advanced nuclear on account of hydrogen’s greater flexibility, and because advanced nuclear projects continue to experience cost overruns and project delays.

But nuclear isn’t the only low-carbon energy sector facing delays. David Hardy, group executive vice president and CEO of Ørsted Americas, said the company spent 10 years trying to get a permit for its first offshore wind farm in the U.S., which is now under construction and on track to be the first completed commercial offshore wind farm in the country.

“We have to do better than that if we’re really going to deploy this capital at pace,” he said, noting that the company’s onshore wind projects have run into unexpectedly high system upgrade costs and lengthy interconnection delays. “We want to deploy more wind and solar and the transmission is just not available,” he said.

Fang agreed, adding that many projects on the book at Bank of America have run into delays.

“The IRA is a tremendous tailwind for renewable energy,” Hardy said. “But we have real headwinds we are challenged with as well.”